TMI Blog2006 (5) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 14 of the Act of 2002. 3. Mrs. Mehta has submitted that the action of the Bank in invoking the provisions contained in the Act of 2002 is illegal, made without the authority of law. She has submitted that the Company s account has not been declared to be the non-performing asset. The Bank, therefore, has no authority in law to invoke the provisions contained in the Act of 2002 for recovery of its dues. She has submitted that the Bank has instituted recovery proceeding before the Debt Recovery Tribunal (hereinafter referred to as, "the Tribunal") on 1st October, 2002. The Bank having invoked the jurisdiction of the Tribunal for recovery of its dues under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as, "the Act of 1993"), the Bank is debarred from taking measures for recovery of its dues against the secured assets under the Act of 2002. She has submitted that the Bank does have a remedy of recovery by sale of secured assets under the Act of 2002. However, the Bank does have equally efficacious remedy for recovery of its dues under the Act of 1993. As the Bank has two separate and distinct remedies available the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the matters of Bihar State Co-operative Marketing Union Ltd. v. Uma Shanker Sharan AIR 1993 SC 1222; Andhra Pradesh State Financial Corpn. v. GAR Re-Rolling Mills AIR 1994 SC 2151; Central Bank of India v. Ravindra AIR 2001 SC 3095; Unique Butyle Tube Industries (P.) Ltd. v. U.P. Financial Corpn. [2003] 41 SCL 418 ; Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513 and of Punjab and Haryana High Court in the matter of Kalyani Sales Company v. Union of India [2006] 70 SCL 177 . 4. The petition is contested by Mr. Trivedi. He has relied upon the counter-affidavit made by the Bank. He has submitted that section 17 of the Act of 2002 provides a complete remedy to the aggrieved persons. Against the impugned action of the Bank an appeal shall lie to the Debt Recovery Tribunal as envisaged under section 17 of the Act of 2002. The present petition, therefore, deserves to be dismissed on the ground of availability of alternative, efficacious, statutory remedy. He has submitted that section 14 of the Act of 2002 does not envisage a notice to the borrowers of the guarantors. The order made by the District Magistrate under section 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw the proceeding pending before the Tribunal before it elected to invoke its right under the Act of 2002. 8. To examine this issue, one has to refer to section 19 of the Act of 1993. Section 19 of the Act of 1993 provides, inter alia, for application to the Tribunal. It empowers a bank or a financial institution, which has to recover any debt from any person, to make an application to the Tribunal. The first proviso to sub-section (1) of the said section 19 enables a bank or a financial institution to seek permission of the Tribunal to withdraw the application for the purpose of taking action under the Act of 2002. The said section 19(1) and the proviso thereof read as under : " Application to the Tribunal. (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction ( a )the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business, or personally works for gain; or ( b )any of the defendants, where there are more than one, at the time of making the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisos to section 19 of the RDB Act also contemplate an expeditious decision of an application for withdrawal of the application made under the provisions of section 19(1) to enable the Bank to have action under the Act. Thus, we hold that though it is discretionary for the Bank to proceed under the Act, but if the Bank or the financial institutions chooses to take recourse to the Act, it is mandatory for the Bank or the financial institution as the case may be, to withdraw its application made to the DRT." (p. 199) Consequently, it has been held that : ". . .Thus, we conclude that the Bank or financial institution has to elect its remedy to either proceed under the RDB Act or to withdraw such proceedings to enable them to initiate action under the Act." (p. 199) 10. The Bombay and the Kerala High Courts, however, have a different view. The Kerala High Court has, in the matter of Sahir Shah v. Bank of India [2006] 66 SCL 14 held that (para 10) : ". . . It is not mandatory on the part of the Bank or Financial Institution to make an application before the Tribunal or to seek permission before invoking the provisions of the Securitisation Act. The power conferred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 13(2) had been issued prior to 11-11-2004, there is no requirement to take permission from the Debts Recovery Tribunal for withdrawal of an application pending before it. It is only where notice under section 13(2) is sought to be issued subsequent to 11-11-2004 that permission for withdrawal of an application pending before the Debts Recovery Tribunal is necessary; and no action can be taken under the Securitisation Act before grant of such permission by the Tribunal." (p.724) 13. What could be the legislative intent ? Does not a right to withdraw the pending proceeding inhere in every litigant ? Is it not inherent, that a legal proceeding pending before any Court or judicial forum cannot be withdrawn without the express permission of that Court or the judicial forum? If withdrawal of any legal proceeding with the permission of the Court is permissible under ordinary law, why should the Legislature specifically provide for application for such permission. If the legislative intent were to make it compulsory to withdraw the pending proceeding before the Tribunal, the Legislature has not said so in specific terms. In my view, it would be incongruent to say that a pending proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings. That would also raise various other questions like what should happen to an order of attachment if made under sub-section (15) of section 19 of the Act of 1993. Moment the application is permitted to be withdrawn, such order made pending the application would cease to operate. In that case, would not the borrower in default be given a free reign to fritter away the properties earlier under attachment by the Tribunal. The question of limitation should also arise as section 24 of the Act of 1993 provides that, ". . .The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal." If the Legislature intended the aforesaid proviso to be mandatory, the Legislature would have provided for extension of period of limitation as it has been done in the Act of 1985. Section 22 of the Act of 1985 provides for suspension of the legal proceedings and contracts. In view of the suspension of the proceedings under sub-section (1) of section 22 of the Act of 1985, the Legislature has extended the period of limitation by a specific provision made in sub-section (5) of the said section 22 as under : "In computing the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany paid the said sum of Rs. 275 lakhs within three months from the date of communication of the sanction by the Bank. It is stated that the Company failed to honour its commitment under the said settlement. In view of the Company s failure to pay the sum of Rs. 275 lakhs as agreed, the Bank has become entitled to recover its dues in its entirety. 18. The fact that the petitioners failed to pay the sum of Rs. 275 lakhs as agreed is not denied. The settlement having failed the Bank is justified in recovering its dues. 19. The contention that the impugned order of the District Magistrate made on 4-1-2005 is illegal and void inasmuch as no notice was issued to the petitioners nor they were afforded opportunity of hearing before the District Magistrate also requires to be rejected. It should be noted that section 14 of the Act of 2002 is in the nature of executing the order. It does not contemplate a notice to the borrower/guarantor or hearing the borrower/guarantor. 20. The question of justifying the Bank s claim or whether or not the Bank is entitled to capitalize on the penal interest cannot be decided in the present petition preferred under article 226 of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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